By Lee Egerstrom, 09/26/1999
Sep. 26--The Schell-Marti family and its 140-year-old August Schell Brewing Co.
has endured hardships in each of its five generations of owners. The founder and
company namesake survived one of the biggest battles in white-Indian warfare in
American history when the adjacent town of New Ulm was burned. Subsequent
generations endured the Prohibition years, and two world wars when there was
open hostility toward people and products with German names.
Ted Marti, a great-great grandson of August Schell, spoke about his family's
beer business with staff writer Lee Egerstrom. The company employs 32 people
including a groundskeeper for the brewery property that is a tourist attraction
at New Ulm. Annual sales swing between $5 million and $10 million, depending on
how much contract brewing the company does for other firms. The text is edited
for clarity and conciseness.
QUESTION: Is it still true Schell is the nation's second oldest family-owned
brewery?
ANSWER: Yes. We're about 140 years old (founded 1860). The only older family
operated brewery is in Pennsylvania, the Yuengling Brewery (in Pottsville,
founded 1829).
Q: It seems that each generation gets tested here in New Ulm. Now the question
is, can you survive the Budweiser frogs?
A: We do get tested. We face challenges from the large advertising budgets that
the Budweisers and Millers have, and the concentration we're seeing in the
industry. We can't compete in their market, but we can compete in the craft beer
market where tasteand brewing differences
are more important. We're in that premium, craft beer segment.
Q: Don't you play a couple of roles? You are in the craft beer market in the
Twin Cities and most areas of the Upper Midwest. But don't you also compete with
the big brands as a regional beer in Southern Minnesota and parts of Iowa?
A: We do. So we really are two brewing concepts based on geography. The
competition we have with the big companies isn't so much in the market. It comes
on the trucks and in distribution. There is a lot of concentration going on in
beer wholesaling. Budweiser wants its distributors to think about Bud products,
not about the small companies trying to share space on the distributors' trucks.
I can't say I blame them (Budweiser parent Anheuser-Busch). But it is making it
more difficult for small breweries.
Q: The other regional breweries have the same complaint. Is there anything you
can do about distribution jointly with the other small breweries?
A: We'll have to look at this sooner or later. But Minnesota law calls for
different sectors in the beer industry, and the law favors the beer wholesalers.
The problem comes when one beer company commands 90 percent or more of the
business with a wholesaler. The small brewer has a hard time getting the
wholesaler's attention. That's pretty understandable.
Q: You mentioned the concentration of the industry by the big brewing companies.
Isn't part of the problem the number of new beers that keep coming to the
market?
A: There has been an explosion of new beers. It takes a while for the market to
sort out the good beer from ordinary product with new names. This has been a
problem for the craft beer industry. The big brewers have also entered the
market with their versions of craft beer, and they undercut the craft beers by
about $1 per six-pack. It takes some time for consumers to sort the difference
between quality products and stuff that's just being thrown out on the market.
Our having been around for 140 years is a benefit by giving us credibility with
wholesalers and consumers.
Q: You just expanded your brewhouse last year. Was this to increase brewing
capacity or was it to modernize the brewery?
A: It was an improvement. It made us more efficient with heat and the grain we
use. The new system increased the utilization of our grain by 10 percent. There
used to be some very happy cows around New Ulm. (Brewery wastes are sold as
cattle feed.) Thereare cost savings in making better use of the grain.
Q: Is there a sixth generation of the family coming along?
A: It's hard to say. I have two young sons who do some work helping out around
here. There is romance to brewing like there is to a few industries. But it
isn't easy keeping families in American businesses.
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